Clarity, honesty vital during volatility

November 03, 2008
by John Weckenmann, Ken Boughrum

With turmoil in financial markets, reverberations continue to spread throughout the economy. Volatility continues, its impact felt across industries around the world. As fortunes shift, companies need to communicate new priorities to stakeholders. Even for companies not directly affected, stakeholders will want to know what the current situation means and how their company will be affected in the long term.

With turmoil in financial markets, reverberations continue to spread throughout the economy. Volatility continues, its impact felt across industries around the world. As fortunes shift, companies need to communicate new priorities to stakeholders. Even for companies not directly affected, stakeholders will want to know what the current situation means and how their company will be affected in the long term.

The recent turmoil has raised questions about a range of corporate practices – from executive compensation to investment policies. A Ketchum survey shows that trust in corporations is already low among consumers who are likely to shape public opinion. Based on this study of consumers in 11 countries, ideas emerge for how corporations can strengthen trust with stakeholders.

It's essential that companies understand their vulnerabilities. Corporate communications can be the catalyst for updating a company's risk profile and for asking the tough questions that inevitably come from media and third parties.

Research shows that influential consumers have high expectations that companies will be open in communications. That makes it key in restoring trust. The dimensions of transparency should be factored into communications planning: How forthright a company is; whether it's addressing critical issues in a timely fashion; whether the tone of its communications is appropriate; and who is speaking.

Our research also shows that influential consumers want and expect CEOs to be involved in communications at moments like this.

During economic uncertainty, the bonds between employers and employees break down. Firms might have an unclear picture of how the markets will affect their business, as they decide how to communicate to employees. They should avoid waiting until all of the answers are clear. Here are some guidelines:

Strategize and prepare. A firm's communications should allow it to be sensitive to employees and true to its core values. Make contingency plans for best- and worst-case scenarios and determine what kind of messaging will engage employees.

Be direct and honest. Being candid about the challenges – and opportunities – ahead will lower anxiety in the workplace. Employees need to understand a situation fully before they can emotionally commit to helping fix it.

Remember the core task. During turmoil, employees may lose sight of business goals. Employers shouldn't. Communicate clearly and frequently to employees about how their effort will better position the company for the long term.

Say, “Thank you.” Lack of recognition does more harm to an employee's psyche than an uncertain environment. Praise employees while addressing their concerns.

Communication is more important in times of turmoil and uncertainty. Employees, investors, and other stakeholders always look to the company for perspective, reassurance, and basic information.
John Weckenmann is partner, director of North American corporate practice, Ketchum; and Ken Boughrum is EVP, MD of Stromberg Consulting, a Ketchum firm.